GE Comes to Lunch. Want to Guess Who the Appetizer Will Be?

Written By: D. Geller

Published: March 13 2000

Event Summary

General Electric
Information Services (GEIS, a division of General Electric (NYSE: GE),) will
become a holding company managing two new business units. GE Systems Services
takes over the current infrastructure operations, including data centers, networks,
and help desks. The other new company, GE Global Exchange Services, has four
divisions that will focus on Internet Data Exchange, Enterprise Application
Integration (EAI), E-procurement, and the creation of trading exchanges.

Market
Impact

This
is not a simple case of a clicks-and-mortar company suddenly deciding that the
future is in E-commerce. General Electric has been setting this table for a
while.

GEIS
was a pioneer in creating trading exchanges based on the EDI standard, and has
been a strong participant in XML standardization efforts, including CommerceNet's
and Microsoft's. GEIS' Trading Process Network was an early E-procurement experiment.
Also, early in 1999 GEIS entered into a partnering arrangement with Global TeleSystems
Ltd. of India. Under the agreement Global TeleSystems was to develop E-commerce
software and systems for GE. (Perhaps not coincidentally, Global TeleSystems
has announced plans to launch its own business-to-business service in Indian
markets.) However, this arrangement does not represent the bulk of software
in this comprehensive offering.

GE
has the infrastructure, acumen, existing customer base and financial strength
to rapidly become a major player in the E-procurement space, which is the core
of any E-commerce initiative. Its major a priori weakness may be that it does
not have the cachet of such pure-play vendors as Ariba and Commerce One, but
a few major customer signings could have observers chanting a different tune.
GE will be using a package called Purchasing Experttm, which it has
previously offered in Europe, Asia, and Africa. Since these markets are not
as competitive as North America, it is certainly possible that the software
will not stack up to the current industry leaders. The software will be available
in June.

Whatever
impact the entry of this large company might have had on the market was dwarfed
by the announcement, just two days later, of a major partnership between Ariba
(NASDAQ: ARBA), i2 (NASDAQ: ITWO) and IBM (NYSE: IBM) (link to as yet unwritten
article). These three companies are laying out a buffet consisting of hosting,
procurement, and supply chain capabilities that will be hard for GE to match.
As IBM's senior V.P. William A. Etherington said during the announcement, "It's
not the big that will eat the small - it's the fast that will eat the slow."

GE
will have to act in Internet time to show major strength, and it must have a
first-rate software offering. It would not be foolish for GE to evaluate whether
Purchasing Expert will stand up against Ariba or Commerce One. If not, a different
strategy might be appropriate. Attempting to partner with Commerce One (which
we think unlikely) or to purchase a second tier vendor like Concur could be
the best way for GE to keep from being relegated to the children's table.

User
Recommendations

A user looking for a hosted E-procurement solution, especially one with existing
ties to GE or one that is heavily reliant on EDI can expect GE's solution to
be of interest. This is also true for users that will be interested in developing
new electronic communication pathways with business partners, as GE's focus
on XML is likely to be a real strength. However, GE's ability to deliver is
still in the future, and we don't see any compelling reason from this announcement
that a user who is ready to act today should wait for that tomorrow.